Merging existing entities is likely to be announced in the Union budget 2021-22 to meet long-term funding needs of new, stalled and under-construction infrastructure projects worth over ₹100 trillion
The creation of a mega development finance institution (DFI) by merging existing entities is likely to be announced in the Union budget 2021-22 to meet long-term funding needs of new, stalled and under-construction infrastructure projects worth over ₹100 trillion, two people aware of the development said, requesting anonymity.
A large DFI is necessary for rapid infrastructure development, which in turn will help put India on a higher growth trajectory, as it would have a cascading effect on all sectors of the economy, they added.
The budget, to be presented by finance minister Nirmala Sitharaman on 1 February, is expected to focus on reviving the economy following the massive slowdown due to the covid-19 outbreak and the 68-day stringent nationwide lockdown from 25 March.
There is a need for a mega DFI as commercial banks are not suited for long-term financing of infrastructure projects with very long gestation periods, the people cited above said, adding that such an institution could also help revive stalled projects worth ₹10 trillion.
“Most of these projects are languishing because of a fund crunch," one of the two people, a government official, said. The proposed mega DFI “which may include an existing financial institution and some existing funds will meet the long-term financing need of these projects," he added.